RBI/DOR/2025-26/148
DOR.AUT.REC.No.67/24-01-041/2025-26 November 28, 2025 Reserve Bank of India (Commercial Banks – Undertaking of Financial Services) Directions, 2025 (Updated as on December 05, 2025) In exercise of the powers conferred by Section 35 A of the Banking Regulation Act, 1949, and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. Chapter I – Preliminary A. Short Title and Commencement 1. These Directions shall be called the Reserve Bank of India (Commercial Banks – Undertaking of Financial Services) Directions, 2025. 2. These Directions shall come into force with immediate effect. Provided that, the provisions contained in paragraph 30 to paragraph 36 shall come into effect from January 1, 2026, or from an earlier date as may be decided by a bank as per its internal policy. B. Applicability 3. These Directions shall be applicable to Commercial Banks (hereinafter collectively referred to as 'banks' and individually as a 'bank'). For the purpose of these Directions, ‘Commercial Banks’ mean banking companies (other than Small Finance Banks, Payment Banks, and Local Area Banks), corresponding new banks, and the State Bank of India, as defined respectively under clauses (c), (da), and (nc) of Section 5 of the Banking Regulation Act, 1949. 1Paragraph 18(4) of these directions shall apply to all Non-Banking Financial Companies (including Housing Finance Companies) which are group entities of a bank operating in India. C. Definitions 4. In these directions, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below: (1) 2‘Agency Business’ means an arrangement under which a bank or its group entity acts as an agent of a third-party product or service provider (TPPSP), without risk participation, to facilitate the sale of the latter’s financial products or services (e.g., insurance, mutual fund, pension fund, etc.) to its own customers. Under agency business arrangement, the bank and the group entity shall enter into an agreement with a TPPSP for sale of only regulated financial products or services. The activities covered under agency business arrangements may inter-alia include marketing, sales, promotion, initial point of contact for redressal of grievance and other after-sale services related to the product or service (1A) ‘Assignee’ shall have the same meaning as defined in the Factoring Regulation Act, 2011; (2) ‘Assignor’ shall have the same meaning as defined in the Factoring Regulation Act, 2011; (3) ‘Associate’ shall have the same meaning as defined in terms of the Accounting Standards of the Institute of Chartered Accounts of India; (4) ‘Debtor’ shall have the same meaning as defined in the Factoring Regulation Act, 2011; (5) ‘Debtor company’ means any company to which the bank currently has or previously had a loan or investment exposure (excluding equity instruments) anytime during the preceding twelve months; (6) ‘Equity instrument’ means equity shares, compulsorily convertible preference shares (CCPS) and compulsorily convertible debentures (CCD); (7) ‘Factoring’ shall have the same meaning as defined in the Factoring Regulation Act, 2011; (8) ‘Financial Services Company’ means a company engaged in the ‘business of financial services’; Explanation: The ‘business of financial services’ shall include: -
the forms of business enumerated in clauses (a), (c), (d), (e) of sub- Section (1) of Section 6 of the Banking Regulation Act, 1949 and notified under clause (o) of sub-Section (1) of Section 6 of the Banking Regulation Act, 1949; -
the forms of business enumerated in clause (c) and clause (f) of Section 45 I of Reserve Bank of India Act, 1934; -
business of credit information as provided under the Credit Information Companies (Regulation) Act, 2005; -
operation of a payment system as defined under the Payment and Settlement Systems Act, 2007; -
operation of a stock exchange, commodity exchange, derivatives exchange or other exchange of similar nature; -
operation of a depository as provided under the Depositories Act, 1996; -
business of an asset reconstruction company as provided under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; -
business of a merchant banker, portfolio manager, stock broker, sub- broker, share transfer agent, trustee of trust deeds, registrar to an issue, merchant banker, underwriter, debenture trustee, investment adviser and such other intermediary as provided in the Securities and Exchange Board of India Act, 1992 and the regulations made thereunder; -
business of a credit rating agency as defined in the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999; -
business of a collective investment scheme as defined under the Securities and Exchange Board of India Act, 1992; -
business of managing a pension fund; -
business of an authorised person as defined under the Foreign Exchange Management Act, 1999; and -
such other business as may be specified by RBI from time to time. (9) ‘Government Securities’ shall have the same meaning as defined in the Government Securities Act, 2006; (9A) 3‘Group entity’ means an entity which is a subsidiary or joint venture or associate of a bank. The definition of a subsidiary, joint venture and associate for banks shall be as stated in the Accounting Standards of the Institute of Chartered Accountants of India. Entities held under NOFHC shall not be treated as group entities of a bank for the purpose of these directions (10) ‘Hire Purchase’ shall have the same meaning as defined in the Hire Purchase Act, 1972; (11) ‘Investment Advisory Service’ means the service offered by an investment adviser as defined in the SEBI (Investment Advisers) Regulations, 2013; (12) ‘Joint Venture’ shall have the same meaning as defined in terms of the Accounting Standards of the Institute of Chartered Accountants of India; (13) ‘Mutual Fund’ shall have the same meaning as defined in SEBI (Mutual Funds) Regulations, 1996; (14) ‘Non-Financial Services Company’ means a company engaged in businesses other than those specified in clause (8) above; (15) ‘Pension Fund Management’ means management of a pension fund as defined in the Pension Fund Regulatory Development Authority (Exit and Withdrawals under National Pension System) Regulations, 2014; (16) ‘Portfolio Management Services’ means the service offered by a portfolio manager as defined in the SEBI (Portfolio Managers) Regulations, 1993; (17) 4‘Referral Services’ means an arrangement under which a bank may refer its customers to a TPPSP by making available information about the financial products or services offered by the TPPSP. Note: Under referral arrangement, the bank shall neither be involved in any of the processes relating to the third-party products or services (TPPS) nor the name or brand of the bank shall feature in any of the product/service documents. No processes relating to TPPS shall either be integrated with the bank’s platform/carried out within the premises of the bank (unless specifically permitted) or be accessible in the form of a micro-site or micro-application, except for an access link to redirect the customer to the TPPSP (18) ‘Subsidiary’ means a subsidiary as defined in terms of the Accounting Standards of the Institute of Chartered Accountants of India. 5. All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of India Act, 1934, or any statutory modification or re-enactment thereto, or Glossary of Terms published by RBI or as used in commercial parlance, as the case may be. Chapter II – Role of the Board 6. The Board of a bank shall be responsible for approval of policies and risk governance in respect of various activities undertaken by the bank. A. Board Approved Policies 7. A bank shall put in place Board-approved policies for, (1) insurance distribution to, inter alia, ensure customer suitability, appropriateness, a clear grievance redressal framework and compensation policy to address service-related issues effectively; (2) governing the corporate agency business of insurance companies undertaken departmentally by the bank. The policy shall, at a minimum, cover the model of insurance distribution to be adopted, customer suitability and appropriateness, and the framework for grievance redressal; (3) specifying the risk control measures and prudential norms for exposure limits applicable to each trading member, factoring in parameters such as net worth, business turnover, and other relevant risk indicators (in case the bank intends to function as a Professional Clearing Member in the commodity derivatives segment of SEBI-recognised exchanges); and (4) governing the bank’s exposure to trading members, ensuring consistency with the overall risk appetite and regulatory requirements (in case the bank intends to function as a Professional Clearing Member in the commodity derivatives segment of SEBI-recognised exchanges). B. Key responsibilities 8. In respect of insurance distribution business, the Board shall ensure that a robust internal grievance redressal mechanism is in place. 9. Where a bank sponsors a subsidiary, the Board shall ensure that an arm’s length relationship is maintained with the subsidiary. The performance of such subsidiary shall be reviewed by the Board at periodic intervals. 10. In respect of factoring business undertaken by the bank departmentally, the Board shall approve limits for underwriting commitments pertaining to the credit risk on the debtor under without-recourse factoring. 11. The Board of a bank intending to function as a Professional Clearing Member in the commodity derivatives segment of SEBI-recognised exchanges shall: (1) determine the aggregate exposure limits that the bank may assume on its registered clients, in relation to the bank’s net worth, and ensure that the exposure is monitored on an ongoing basis; and (2) prescribe internal margin requirements for the bank’s operations as a Professional Clearing Member, which shall be at least as stringent as those prescribed by the Commodity Exchanges and the RBI, wherever applicable. 12. The Board shall approve the bank’s application to the RBI for obtaining a No Objection Certificate (NOC) for its branch / subsidiary / joint venture in GIFT-IFSC to act as a Trading Member (TM), Trading and Clearing Member (TCM), or Professional Clearing Member (PCM) of India International Bullion Exchange IFSC Limited (IIBX). 13. The Board shall approve and ensure implementation of an effective risk management framework at the bank’s branch in GIFT-IFSC, including prudential exposure limits for each trading client based on their financial parameters such as net worth and business turnover, shall be ensured on an ongoing basis. 14. The Board shall determine and monitor the total exposure that may be assumed by the branch in GIFT-IFSC in its role as PCM of IIBX on its clients, in relation to both the parent bank’s and the branch’s Tier 1 capital. 15. The Board shall review and approve the proposed business plan, including the risk management architecture of the branch. 16. The Board shall prescribe margin requirements for the bank’s operations as PCM of IIBX. 17. The Board may determine a global sub-limit for the bank’s proprietary net overnight open position in gold / silver under its role as TM/TCM on IIBX, which shall not exceed one tonne of gold equivalent. Chapter III – General Guidelines A. Forms of Business 18. 5A bank may undertake businesses as permitted under Section 5(b) and Section 6(1) of the Banking Regulation Act, 1949 either departmentally or through a group entity set up as per Section 19 of the Act, subject to the following conditions: (1) The business of banking as defined in section 5(b) of Banking Regulation Act, 1949 shall be undertaken only departmentally. (2) Acceptance of time deposits shall be undertaken only departmentally by the bank, and if permitted, through a housing finance company in the bank group (bank group shall include bank and its group entities). (3) As a principle, any form of business shall be undertaken by one entity in a bank group. However, if a bank undertakes a form of business through more than one entity in a bank group, the same shall be done with proper rationale such as business segmentation/specialization, duly recorded and approved by the Board of the bank. (4) In case lending business is undertaken through a group entity also, the following additional conditions shall be applicable to such a group entity (NBFCs including HFCs): (i) Regulations as applicable to Upper Layer NBFC other than the requirement for listing, irrespective of whether the NBFC has been specifically identified by the Reserve Bank as Upper Layer or not. Notwithstanding the same, listing requirement shall be complied with by those NBFC group entities which are identified by the Reserve Bank as Upper Layer. (ii) Furthermore, following stipulations/restrictions under Reserve Bank of India (Commercial Banks – Credit Risk Management) Directions, 2025 and Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025 shall apply mutatis-mutandis to all the fresh/renewal and additional loans/limits sanctioned/disbursed by the NBFC group entities: (a) Stipulations on advances: -
against parent bank's shares -
to parent bank's Directors and loans and advances to relatives of Directors -
for financing of Promoters Contribution -
for financing of Land Acquisition (b) Limits per borrower for loans and advances against Shares, Debentures, Bonds and Indian Depository Receipts, IPO Financing and ESOP Funding. (5) Mutual fund business, insurance business, pension fund management, investment advisory and management services, portfolio management services and broking services shall not be carried out departmentally, but, only through a group entity. (6) A bank shall require prior approval of the Reserve Bank to undertake any new form of business through the bank or a group entity, other than those permitted in these directions. (7) There shall be a policy for each form of business undertaken by the bank, which comprehensively covers various aspects of the said business including identification of various risks associated with it, an appropriate risk mitigation framework, and adherence to capital allocation norms as applicable. 19. 6A bank which is not in conformity with the directions given in the paragraph 18 above, shall not undertake any new business in the respective segment from April 1, 2026. It shall also submit a compliance status in this regard by March 31, 2026. Existing facilities, however, shall continue to be serviced till its maturity. 20. 7An NOFHC shall not require prior approval of the Reserve Bank for the entities held by it to undertake forms of businesses listed under para 18(5) above unless advised otherwise. The NOFHC shall intimate the Reserve Bank within 15 days from the date of resolution of the Board for undertaking such businesses. Further, an NOFHC shall require the prior approval of the Reserve Bank for the entities held by it to undertake any other form of business subject to other instructions as applicable. 21. 8Unless specifically permitted, a bank shall obtain no-objection from the Reserve Bank for any of its overseas branches (including the branches operating in IFSC, GIFT City) to undertake any business for which prior approval is required by the parent bank in India as per para 18(6) above. Further, a bank shall ensure that its overseas branches (including the branches operating in IFSC, GIFT City) adhere to the more stringent of the host or home country regulations for the purpose of this Master Direction.B. Prudential Regulation for Investments 22. 9Investment by a bank in any group entity or in other entities, including overseas investments, shall be subject to the prudential limits specified below: B.1 10Limits in terms of bank’s paid-up share capital and reserves 23. Equity investment by a bank in any entity, including its group entity, individually, shall not exceed 10 per cent of the bank’s paid-up share capital and reserves as per the last audited balance sheet or audited/unaudited balance sheet of the latest quarter, whichever is lower. 24. The aggregate equity investments made in all entities, including group entities and overseas investments, shall not exceed 20 per cent of the bank’s paid-up share capital and reserves as per the last audited balance sheet or audited/unaudited balance sheet of the latest quarter, whichever is lower. For calculating the aggregate equity investment limit, the following investments shall be excluded. (1) investments in the equity of entities held under ‘Held for Trading’ category as stipulated in the Reserve Bank of India (Commercial Banks – Classification, Valuation and Operation of Investment Portfolio) Directions, 2025 as updated from time to time, subject to the limit stipulated under Section 19(2) of the Banking Regulation Act, 1949. (2) investments of up to 30 per cent in the equity of non-financial entities acquired through restructuring of debt or to protect the bank’s interest on loans/investments made to an entity. B.2 11Limits in terms of investee’s capital 25. A bank group may make an aggregate investment of less than 20 per cent (with or without investment by the bank) in the equity share capital of an entity without prior approval, subject to the following conditions: (1) The bank’s CRAR shall not be less than the minimum prescribed capital (including Capital Conservation Buffer) post the investment; and (2) The bank should have reported net profit in each of the preceding two financial years. 26. Notwithstanding the conditions listed in para 25, investments held under ‘Held for Trading’ category shall not require prior approval, subject to the limit stipulated under Section 19(2) of the Banking Regulation Act, 1949. 27. Investments made by the Asset Management Companies (AMCs) from the funds of the unit holders, shall not be included in the aggregate limit for the purpose of para 25 and para 28. However, the investment made by group entities of the bank including AMCs, from their own funds, shall be included for the purpose of the aggregate limit of the bank group. 28. A bank group, with prior approval of the Reserve Bank, may make an aggregate investment of 20 per cent or more (with or without any investment by the bank) in the equity share capital of an entity. 29. Banks shall be allowed to set up subsidiaries only for undertaking activities as permitted under Section 19(1) of the Banking Regulation Act, 1949. Further, banks shall require prior approval for making additional investment in the equity share capital of any group entity. 29A. Save as otherwise provided in these directions, the following specific limits/conditions shall be adhered to: (1) A bank shall be allowed to invest 20 per cent or more in the equity share capital of a non-financial services entity but not exceeding 30 per cent (except as subsidiary) only in the following circumstances: (i) the investee entity is engaged in non-financial business permissible for banks under Section 6(1) of the Banking Regulation Act, 1949, subject to prior approval of the Reserve Bank; or (ii) acquisition is through restructuring of debt or to protect the banks’ interest on loans/investments made to an entity. (iii) Banks shall not require prior approval for such acquisitions; however, they shall submit a time bound action plan for disposal of such shares. The action plan shall be submitted within 30 days of such acquisition. (2) A bank shall not sponsor (as defined in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) more than one Asset Reconstruction Company (ARC). Further, the aggregate shareholding of a bank group in any ARC shall be less than 20 per cent of the equity share capital of the ARC. (3) Banks held under the NOFHC structure shall adhere to Guidelines for Licensing of New Banks in the Private Sector’ dated February 22, 2013, for their investments in the equity share capital of a company. B.3 Investments in Alternative Investment Funds (AIFs) B.3.1 General Requirements 30. A bank’s investment policy shall have suitable provisions governing its investments in an AIF Scheme, compliant with extant law and regulations. B.3.2 Limits on Investments and Provisioning 31. 12A bank shall not individually contribute more than 10 percent of the corpus of a Category I or Category II AIF Scheme.32. The aggregate contribution by all Regulated Entities (REs) in any AIF Scheme shall not be more than 20 percent of the corpus of that scheme. In this context, ‘RE’ shall mean: -
Commercial Banks (including Small Finance Banks, Local Area Banks); -
Regional Rural Banks; -
Urban Co-operative Banks; -
State Co-operative Banks / Central Co-operative Banks); -
All-India Financial Institutions; and -
Non-Banking Financial Companies (including Housing Finance Companies) 33. Where a bank contributes more than five percent of the corpus of an AIF Scheme that has downstream investment (excluding equity instruments) in a debtor company of the bank, the bank shall be required to make 100 percent provision to the extent of its proportionate investment in the debtor company through the AIF Scheme, subject to a cap equivalent to bank’s direct loan and / or investment exposure to the said debtor company. 34. Notwithstanding the provisions of paragraph 33 above, where a bank’s contribution is in the form of subordinated units, it shall deduct the entire investment from its capital funds – proportionately from both Tier-1 and Tier-2 capital (wherever applicable). B.3.3 Exemptions 35. Any outstanding investment or commitment made by a bank with the prior approval of the RBI as on July 29, 2025, under the extant provisions of these Directions, are excluded from the scope of paragraphs 31 and 32 above. 36. The RBI may, in consultation with the Government of India, by way of a notification, exempt certain AIFs (Annex-I) from the scope of the provisions of the circulars contained in Annex-II and these Directions on AIF, except for paragraph 30 above. 37. As stated in paragraph 2, the provisions of paragraph 30 to 36 above shall come into force with effect from January 1, 2026, or from an earlier date as decided by a bank in line with its internal policy (referred to as the ‘effective date’ for the provisions of paragraphs 30 to 36 above). Until such commencement, banks shall continue to be guided by the provisions of the circulars, contained in Annex II. These circulars shall stand repealed from the effective date of these Directions on AIF. Any new commitment by a bank towards contribution to an AIF scheme, made after the effective date, shall be governed by these Directions on AIF. 38. Notwithstanding the above provisions: (1) Outstanding investment by a bank, as on July 29, 2025, in an AIF Scheme in which it has fully honoured its commitment, shall be governed by the provisions mentioned in Annex II; and (2) In respect of any investment made by a bank in an AIF Scheme in terms of an existing commitment as on July 29, 2025, or in terms of a new commitment entered into before the effective date, the bank shall follow, in toto, either the provisions of Annex II or these Directions. B.4 13Other general conditions for Investment in Alternative Investment Fund / Real Estate Investment Trust / Infrastructure Investment Trust 38A. A bank group may make an investment of less than 20 per cent in the corpus of Category I or Category II AIF scheme, without prior approval subject to conditions stipulated under paragraph 25 above. 38B. A bank group may make an investment of 20 per cent or more but not exceeding 30% in the corpus of Category I or II AIF scheme, with prior approval of the Reserve Bank. 38C. No bank shall make any investment in the corpus of Category III AIF scheme. Investment by a bank’s subsidiary in the corpus of Category III AIF scheme shall also be restricted to the regulatory minima prescribed by the Securities and Exchange Board of India. 38D. Additionally, banks shall ensure that their exposure in an investee company through their investments in AIF schemes does not result in circumvention of any regulations applicable to banks. 38E. No bank shall make an investment of more than 10 per cent in the unit capital of a Real Estate Investment Trust/Infrastructure Investment Trust within the overall ceiling of 20 per cent of the bank’s net worth permitted for all direct investments in shares, convertible bonds/ debentures, units of equity-oriented mutual funds and exposures to AIFs. B.5 14Additional conditions for investments 38F. As part of bank’s ICAAP framework, the following shall be accounted for the purpose of determining additional capital requirement which will be subject to Supervisory Review and Evaluation Process: (1) risks arising on account of equity investments in unit/paid-up capital, as applicable, of an AIF Scheme done directly or through their group entities. (2) group-wide capital and risk management policy with respect to the capital requirement and the risks faced by their group entities. 38G. These Directions shall be read in conjunction with Reserve Bank of India (Commercial Banks - Concentration Risk Management) Directions, 2025 as applicable to banks. 38H. Breach, if any, in the limits prescribed under this Master Direction shall be reported to the Department of Regulation of the Reserve Bank on PRAVAAH portal through the applicable form within 15 days, from the date of occurrence of such breach along with reason for such a breach and a plan to correct the same. 38I. A bank which is not in conformity with the directions given in paragraphs 22 to 29A and 38A to 38E above, shall submit an action plan by March 31, 2026, to comply with the provisions contained herein within a specified timeline but not later than March 31, 2028. C. Procedure for Application 39. A bank desirous of making an investment or undertaking any business that requires prior approval / no-objection of RBI shall submit an application through PRAVAAH Portal (https://pravaah.rbi.org.in) to the Department of Regulation (DoR), Central Office, RBI. D. Relationship with Subsidiaries 40. A parent bank shall maintain an ‘arm’s length’ relationship with the subsidiary sponsored by it and evolve the following supervisory strategies: (1) The Board of the parent bank shall review the working of subsidiaries at periodical intervals; (2) The parent bank shall undertake inspection / audit of the books of accounts of the subsidiaries at periodical intervals; (3) The subsidiary shall not set up another subsidiary, or promote a new company which is not a subsidiary thereof or undertake any new business without prior approval of RBI; Explanation: ‘New Business’ shall not mean expansion into the same line of business that is already permitted / approved to be undertaken. (4) The subsidiary shall not make any portfolio investment in another existing company with an intention of acquiring controlling interest, without prior approval of the RBI; Explanation: This shall not apply to the investments made by a Category I and II AIF set up by a subsidiary. (5) A subsidiary shall not have any on-line access to customers’ accounts maintained with the bank. The information between a bank and its subsidiary may be shared subject to maintaining arm’s length relationship; (6) The bank shall not grant any unsecured advances to the subsidiary without prior approval of the RBI; and (7) Transactions between a bank and its subsidiary shall be at arm’s length. No preferential treatment shall be given to the subsidiary vis-à-vis a counterparty with similar risk characteristics Chapter IV – Financial Services A. Equipment Leasing and Hire Purchase Business A.1 Equipment Leasing and Hire Purchase business through a subsidiary 41. A bank intending to form a subsidiary for undertaking equipment leasing and hire purchase business shall be subject to the conditions mentioned in paragraph 22. A.2 Equipment Leasing and Hire Purchase business departmentally 42. Equipment Leasing and Hire Purchase business undertaken departmentally shall be subject to the following conditions: (1) Equipment leasing and hire purchase shall be treated on par with loans and advances and shall accordingly be subject to the extant prudential norms on loans and advances as applicable; and (2) A bank shall not enter into leasing agreement with another equipment leasing company and other non-banking finance company engaged in equipment leasing. B. Factoring Services B.1 Factoring business through a subsidiary 43. A bank intending to form a subsidiary for undertaking factoring business shall be subject to the conditions mentioned in paragraph 22. B.2 Factoring business departmentally 44. Factoring business undertaken departmentally shall be subject to the following conditions: (1) Factoring services shall be provided on with recourse or without recourse or on limited recourse basis; (2) Underwriting commitments pertaining to the credit risk on the debtor, under without recourse factoring, shall be in accordance with the Board approved limits; (3) A bank shall conduct thorough credit appraisal of debtors before entering into any factoring arrangement or establishing lines of credit with the export factor; (4) Factoring services shall be extended against invoices representing genuine trade transactions; (5) Factoring shall be treated on par with loans and advances and shall be subject to extant prudential norms on loans and advances as applicable; (6) A bank and factor shall put in place a mechanism for sharing information about common borrowers to avoid double financing. The borrower’s bank shall obtain periodical certificates from the borrower about factored receivables. Factors shall report the sanctioned limits of the borrower to the concerned banks. Information available on CERSAI shall also be considered; Explanation: A common borrower is a person / entity who has availed a credit facility from a bank and is also an assignor in a factoring arrangement. (7) Credit information regarding the non-payment of dues by the person on whom exposure was booked shall be furnished to the Credit Information Companies authorized by RBI subject to the guidelines under Credit Information Companies (Regulation) Act, 2005; and (8) The exposure for facilities extended by way of factoring services shall be reckoned as under: (a) On the assignor, in case of with-recourse factoring. (b) On the debtor, in case of without-recourse factoring. Provided that, exposure shall be on the import factor in cases of international factoring. (c) On the ‘assignor’ or the ‘debtor’ or the ‘import factor’, in case of limited recourse factoring, depending on terms of the agreement. C. Primary Dealership Business C.1 Primary Dealership business through a subsidiary 45. A bank intending to form a subsidiary for undertaking primary dealership business shall register it as an NBFC. The bank shall directly approach Department of Regulation (DoR), RBI for the same. C.2 Primary Dealership business departmentally 46. Primary dealership business undertaken departmentally shall be subject to the authorisation from the Internal Debt Management Department (IDMD), RBI. The bank shall directly approach IDMD for the same. D. Underwriting Activities 47. A bank intending to engage in underwriting of issues of shares, debentures and bonds shall do so either departmentally or through a merchant banking subsidiary. Underwriting business undertaken departmentally and through subsidiary shall be subject to the conditions and prudential regulation requirements specified in Chapter III, respectively. E. Mutual Fund Business 48. A bank shall undertake mutual fund business with risk participation only through a subsidiary / joint venture set up for the purpose. 49. Where a sponsoring bank undertaking the mutual fund business lends its name to the bank sponsored mutual fund, a suitable disclaimer clause shall be inserted while publicising new schemes to the effect that the bank is not liable or responsible for any loss or shortfall resulting from the operations of the scheme. F. Insurance Business F.1 Insurance business with risk participation through a subsidiary / joint venture: 50. A bank shall undertake insurance business with risk participation only through a subsidiary / joint venture set up for the purpose, and subject to fulfilment of the following eligibility criteria as on March 31 of the previous year: -
It has a net worth of at least ₹1000 crore and a minimum net worth of ₹500 crore after investing in the equity of the insurance company; -
It has the minimum prescribed capital (including Capital Conservation Buffer) after making such investment; -
Its net non-performing assets is not more than three percent; -
It has made a net profit in each of the preceding three financial years; and -
The track record of the performance of its subsidiaries, if any, is satisfactory. F.2 Undertaking of insurance broking / corporate agency by a subsidiary / joint venture: 51. A bank shall set up a subsidiary / joint venture company for undertaking insurance broking and corporate agency only after fulfilling the following eligibility criteria as on March 31 of the previous year: (1) Its net worth shall not be less than ₹500 crore after investing in the equity of such company; and (2) It complies with conditions stated under paragraphs 50(2), 50(3), 50(4) and 50(5). F.3 Insurance broking services departmentally 52. A bank may, at its option, act as an insurance broker departmentally subject to the conditions mentioned under paragraph 61 on insurance agency business G. Pension Fund Management 53. A bank shall undertake the business of pension fund management only through a subsidiary set up for the purpose, subject to the fulfilment of the following eligibility criteria as on March 31 of the previous year: (1) Its net worth shall not be less than ₹500 crore after investing in the equity of such company; (2) It has the minimum prescribed capital (including Capital Conservation Buffer) after investment; (3) Its net non-performing assets is not more than three percent; (4) It has made a net profit in each of the preceding three financial years; and (5) The track record of the performance of its subsidiaries, if any, is satisfactory. H. Investment Advisory Services 54. A bank shall undertake the business of investment advisory services (IAS) only through a separate subsidiary set up for the purpose or through one of its existing subsidiaries, subject to the following conditions: (1) Specific prior approval shall be obtained before offering IAS; and (2) IAS shall be provided only for products and services in which banks are permitted to deal in as per the Banking Regulation Act, 1949. I. Portfolio Management Services 55. 15Banks shall offer portfolio management service (PMS) or similar scheme only through a group entity subject to prior approval of the Reserve Bank. 56. A bank shall ensure compliance with the following conditions: (1) PMS shall be in the nature of investment consultancy / management, for a fee, entirely at the customer's risk without guaranteeing, either directly or indirectly, a pre-determined return; (2) The fee charged shall be independent of the return to the client; (3) The funds shall not be accepted for portfolio management for a period less than one year. In the case of placement of funds for portfolio management by the same client on more than one occasion, on a continuous basis, each such placement shall be treated as a separate account and each such placement shall be for a minimum period of one year; (4) Funds accepted for portfolio management from the clients, shall not be entrusted to another bank for management; (5) Portfolio funds shall not be deployed for lending in call money / bills market, and lending to / placement with corporate bodies; (6) A bank providing PMS shall maintain client wise account / record of funds accepted and investments made there against, and all credits (including realised interest, dividend, etc.) and debits (tax deducted at source in respect of interest / dividend on securities) shall reflect in such account. The account holder shall be entitled to get a statement of his portfolio account; (7) A bank’s own investments and investments belonging to the PMS clients shall be kept distinct from each other. Transactions between the bank’s investment account and portfolio account shall be strictly at market rates; (8) A bank shall maintain a ‘Clients’ Portfolio Account’ in its general ledger, reflecting the funds received by it for portfolio management on a day-to-day basis. The balance lying in this account (i.e. undeployed funds, if any, from this account) shall be treated as outside borrowings of the bank and it shall maintain cash reserve ratio / statutory liquidity ratio on such funds. The bank’s liability to its clients in respect of funds accepted by it for portfolio management shall be properly reflected in the bank’s published books of accounts; (9) There shall be a clear functional separation of trading and back-office functions relating to banks' own investment accounts and PMS clients' accounts; and (10) PMS clients' accounts shall be subjected by banks to a separate audit by external auditors. 57. The aforesaid conditions shall, mutatis mutandis, be applicable to the subsidiaries of a bank in so far as they are not contradictory to specific regulations of RBI or SEBI, governing their operations. J. Agency Business 58. Agency business shall be undertaken only for the products and services in which a bank is permitted to deal in as per the Banking Regulation Act, 1949. 59. The service shall be provided on fee basis, without any risk participation. 60. Agency business of mutual fund companies undertaken departmentally shall be subject to the following additional conditions: (1) The investors’ applications for purchase / sale of mutual fund units shall be forwarded to the mutual funds / registrars / transfer agents; (2) The purchase of units shall be at the customers’ risk without the bank guaranteeing any assured return; (3) Mutual fund units shall not be acquired from the secondary market or bought back from a customer for selling it to other customers; (4) Extension of credit facility to individuals against the security of mutual fund units shall be in accordance with the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025; and (5) A bank holding custody of mutual fund units on behalf of its customers shall keep the investments of the customers distinct from its own investments. 61. Corporate agency of insurance companies undertaken departmentally by banks shall be subject to the following additional conditions: (1) There shall be a Board approved policy encompassing the model of insurance distribution to be adopted, issues of customer appropriateness, suitability, and grievance redressal; (2) The deposit to be maintained by an insurance broker as per the IRDAI (Licensing of Banks as Insurance Brokers) Regulations, 2013, as amended from time to time, shall be maintained with a scheduled commercial bank other than itself; (3) A bank shall ensure customer appropriateness and suitability as under: -
All employees dealing with insurance agency / broking business shall possess the requisite qualification prescribed by IRDAI; -
There shall be standardised system of assessing the need/ suitability of products for a customer and the initiation / transaction processes shall be segregated. Products with investment components shall require the bank to necessarily undertake a customer need assessment prior to sale whereas pure risk term products with no investment or growth component shall be deemed as universally suitable products; and -
A bank shall treat its customers fairly, honestly and transparently, with regard to suitability and appropriateness of the insurance product sold. (4) It shall be ensured that performance assessment and incentive structure for staff is not violative of Section 10(1) (ii) of the BR Act, 1949 or the guidelines issued by IRDAI in payment of commissions / brokerage / incentives. It shall also be ensured that no incentive (cash or non-cash) is paid to the staff engaged in insurance broking / corporate agency services by the insurance company; (5) A bank shall not follow any restrictive practices of forcing a customer to either opt for products of a specific insurance company or link sale of such products to any banking product. It shall be prominently stated in all publicity material distributed by the bank that the purchase by a bank’s customer of any insurance product is purely voluntary and is not linked to availment of any other facility from the bank; and (6) A robust internal grievance redressal mechanism shall be put in place along with a Board approved customer compensation policy for resolving issues related to services offered. It shall be ensured that the insurance companies whose products are being sold have robust customer grievance redressal arrangements in place. The bank shall facilitate the redressal of grievances. K. Referral Services 62. A bank offering referral services shall do so only for financial products other than insurance, on a non-risk participation basis. L. Retailing of Government Securities 63. A bank intending to undertake the business of retailing of Government Securities shall do so with non-bank clients subject to the Directions issued by RBI on the subject. M. Membership of SEBI approved Stock Exchanges 64. An AD Category I scheduled commercial bank may become a trading / clearing member of the currency derivatives segment of the SEBI recognised stock exchanges, subject to meeting all of the following conditions: (1) It has a minimum net worth of ₹500 crore; (2) It has the minimum prescribed capital (including Capital Conservation Buffer); (3) Its net NPA does not exceed three percent; and (4) It has made a net profit in the preceding three financial years. Provided that, a bank not meeting the aforesaid conditions may participate in the currency futures market as a client. A bank that is a trading / clearing member shall keep its and its clients’ position distinct from one another. 65. A bank which intends to become a member of a SEBI approved stock exchange for the purpose of undertaking proprietary transactions in the corporate bond market shall do so subject to satisfying the membership criteria of the stock exchanges and complying with the regulatory norms laid down by SEBI and the respective stock exchange. 66. A bank may become a Professional Clearing Member of the commodity derivatives segment of SEBI recognised exchanges only upon satisfying the prudential criteria given in paragraph 64, and subject to the following conditions: (1) A bank shall satisfy the membership criteria of the stock exchanges and comply with the regulatory norms laid down by SEBI and the respective stock exchanges; (2) A bank shall, with the approval of Board, put in place effective risk control measures, prudential norms on risk exposure in respect of each of its trading members, taking into account their net worth, business turnover, etc.; (3) A bank shall not undertake trading in the derivative segment of the commodity exchange on its own account and shall restrict itself only to clearing and settlement transactions done by the trading members / clients on the exchange; (4) A bank shall take exposure on its trading members as per the policy approved by its board; (5) A bank may fulfil pay-in obligations arising out of trades executed by its clients, as clearing member of the exchange subject to the condition that the total exposure which the bank would take on its registered clients should be determined by the Board in relation to the net worth of the bank and should be monitored regularly. However, the bank shall not meet pay-in obligations of any transaction other than what is required in its role as a Professional Clearing Member; and (6) A bank shall ensure strict compliance with various margin requirements as may be prescribed by a bank’s board or the Commodity Exchanges as also the extant RBI guidelines regarding guarantees issued on behalf of commodity brokers. 66A. 16A bank may become Professional Clearing Member for equity derivative segment of the SEBI recognised stock exchanges. Prudential criteria and conditions stipulated for commodity derivative segment in para 66 above shall apply mutatis mutandis to the equity derivative segment. N. Broking services for Commodity Derivatives Segment 67. 17No bank shall offer broking services for the commodity derivatives segment of SEBI recognised stock exchanges except through a separate subsidiary, subject to the following conditions: (1) The subsidiary shall, with the approval of its Board, put in place effective risk control measures including prudential norms on risk exposure in respect of each of its clients, taking into account their net worth, business turnover, etc. (2) The subsidiary shall not undertake proprietary positions in the commodity derivatives segments. (3) The subsidiary shall ensure strict compliance with various margin requirements as may be prescribed by SEBI, its own board or the Commodity Exchanges. O. Participation of Indian Banks on India International Bullion Exchange IFSC Limited (IIBX) O.1 Professional Clearing Member (PCM) of IIBX 68. Branch of a bank in GIFT-IFSC may act as a PCM of IIBX, subject to the parent bank (‘bank’) obtaining a No Objection Certificate (NOC) from the RBI. 69. The bank shall ensure strict compliance on a continuing basis with the following terms and conditions for operating as a PCM of IIBX: (1) The bank shall ensure adherence to extant RBI guidelines on capital requirements for their exposures (including but not limited to default fund contributions, posted collateral, exposure to clients, trade exposure to CCP) arising from its branch in GIFT-IFSC functioning as PCM on IIBX. The bank shall comply with the regulatory capital requirement of the host or home regulator, whichever is more stringent; (2) The bank shall ensure adherence to extant RBI guidelines on management of liquidity risk (including those arising from its functioning as a PCM of IIBX) as issued from time to time; (3) The bank shall ensure adherence to the extant RBI guidelines on large exposure framework as issued from time to time, including all exposures taken by its branch in GIFT-IFSC; (4) In line with the extant prudential regulations applicable to the bank, its branch in GIFT-IFSC shall, with the approval of the bank’s Board, put in place an effective risk management framework including the prudential limits in respect of each of its trading clients, taking into account their net worth, business turnover, and other relevant parameters as per the bank’s assessment. The risk control measures prescribed under the framework shall be in compliance with the guidelines / Directions issued by the host or home regulator, whichever is more stringent; (5) The branch of the bank in GIFT-IFSC may, as a PCM of IIBX, clear and settle trades executed by its clients as trading members of the exchanges subject to the condition that the total exposure which the branch would take on its clients shall be determined by the Board in relation to the Tier 1 capital of the bank as well as the capital of its branch in GIFT-IFSC and shall be monitored on an ongoing basis. However, the bank shall ensure that its branch in GIFT-IFSC, in its role as a PCM, does not undertake any transaction / activity on IIBX other than what is required as a professional clearing member; (6) The bank shall ensure strict compliance with various margin requirements as may be prescribed by its Board; (7) The bank shall comply with all the conditions, if any, stipulated by other regulatory bodies that may be relevant for its role as a PCM; and (8) In the event of non-compliance with extant guidelines, or if the RBI is satisfied that it is necessary and expedient in the public interest so to do, it may issue further necessary Directions (including revocation of approval) and / or impose additional conditions, as it deems fit. O.2 Trading Member / Trading and Clearing Member (TM / TCM) of IIBX 70. Branch / subsidiary / joint venture of a bank in GIFT-IFSC may act as a Trading Member (TM) / Trading and Clearing Member (TCM) of IIBX, subject to the parent bank (‘bank’) obtaining a NOC from the RBI. 71. The bank shall ensure strict compliance on a continuing basis with the following terms and conditions for operating as TM / TCM of IIBX: (1) The TM / TCM shall execute trades only on behalf of clients (without proprietary trading). (2) The bank in its role as TM / TCM shall ensure adherence to the terms and conditions stipulated under paragraph 69 above. (3) The bank shall ensure adherence to extant RBI instructions as contained in the Master Direction - Credit Facility (as updated from time to time). (4) All client trades placed on the exchange shall be against 110 percent advance pay-in of funds (buy order) of the expected value of bullion (quantity & quality specification) intended to be purchased and securities (sell order) in the account of the bank, as is applicable. (5) With reference to the Net Open Overnight Position Limit (NOOPL) for a bank as prescribed in Master Direction - Risk Management and Inter-Bank Dealings dated July 05, 2016 (as updated from time to time), the Board may determine a global sub-limit for net overnight open position in gold / silver, which shall not exceed one tonne of gold equivalent. (6) The bank shall comply with the conditions, if any, stipulated by other regulatory bodies that may be relevant for its role. O.3 Special Category Client (SCC) of IIBX 72. Banks authorized by the RBI for import of gold / silver as per extant Foreign Trade Policy, in addition to the consignment model in domestic tariff area, are allowed to operate as a Special Category Client (SCC) on IIBX for import of gold / silver by sending prior intimation to the Department of Regulation, RBI, and subject to the following conditions: (1) The SCC shall execute only buy trades on behalf of clients; (2) The bank shall ensure adherence to extant RBI instructions as contained in the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025 (as updated from time to time); (3) The SCCs will appoint one of the IFSC Banking Units (IBUs) to act as clearing member on their behalf; (4) The SCCs shall adhere to the conditions stipulated under clauses (4) and (5) of paragraph 71 above; and (5) The bank shall comply with the conditions, if any, stipulated by other regulatory bodies that may be relevant for its role. 73. The parent bank shall, with prior approval of its Board, make an application for NOC for PCM / TM / TCM to the Department of Regulation through Pravaah Portal (https://pravaah.rbi.org.in) subject to fulfilment of the prudential regulations as set out in paragraph 64 above. The application shall also contain the details of the proposed business plan as a TM / TCM / PCM along with particulars of the risk management architecture instituted. 74. A bank acting as a TM / TCM / SCC of IIBX shall be required to seek additional approval from the Department of Regulation in case of any change in their role or scope of activities at IIBX from those permitted by this Direction. P. Operations of subsidiaries and branches in foreign jurisdictions and in International Financial Services Centers (IFSCs) 75. An Indian bank, including those operating in International Financial Services Centers (IFSCs) in India such as Gujarat International Finance Tec City (GIFT City), shall comply with the following directions regarding dealing in financial derivative products by its foreign branches / subsidiaries. P.1 Dealing in financial derivative products 76. The foreign branches / foreign subsidiaries of an Indian bank can deal in financial derivative products, including structured financial derivative products, which are not available or are not permitted by the RBI in the domestic market without prior approval of RBI, subject to compliance with conditions specified in paragraph 78 and those prescribed by the host regulator. 77. The branches / subsidiaries of an Indian bank operating in IFSCs including those operating out of GIFT City may also deal in financial derivative products, including structured financial derivative products, which are not available or are not permitted by the RBI in the domestic market subject to compliance with all applicable laws / regulations and conditions stipulated in paragraph 78 below and those prescribed by the host regulator. P.2 Conditions for dealing in financial derivative products 78. While allowing branches / subsidiaries in foreign jurisdictions as well as in IFSCs to deal in such products, the parent Indian bank shall ensure that: (1) dealing in such products is done with the prior approval from their Board and, if required, the appropriate authority in the concerned jurisdictions; (2) they have adequate knowledge, understanding, and risk management capability for handling such products; (3) they act as market makers for products only if they have the ability to price / value such products and the pricing of such products is demonstrable at all times; (4) their exposure and mark-to-market (MTM) on these products are appropriately captured and reported in the returns furnished to the RBI. They shall provide information about dealing in such financial products as may be specified by the RBI in the manner and format and within the time frame as prescribed by the RBI; (5) they do not deal in products linked to Indian Rupee unless specifically permitted by RBI; (6) they do not accept structured deposits from any Indian resident; and (7) they adhere to the suitability and appropriateness policies as mandated by the RBI and the host regulators, as applicable. P.3 Compliance with prudential norms 79. The financial products dealt with by the foreign branches and subsidiaries as well as IFSCs shall attract the prudential norms such as capital adequacy, exposure norms (including Large Exposure Framework), periodical valuation, and all other applicable norms. Parent bank shall adhere to more stringent among the host and home regulations in respect of prudential norms. 80. In case the current norms of the RBI do not specify prudential treatment of any financial product, the parent bank shall seek specific guidance from RBI. P.4 Activities subject to Indian laws 81. The activities of branches / subsidiaries in foreign jurisdictions and IFSCs shall be subject to the laws in India, unless specifically exempted by law. Chapter V – Repeal and Other Provisions A. Repeal and saving 82. With the issue of these Directions, the existing Directions, instructions, and guidelines relating to undertaking of financial services as appliable to Commercial Banks stand repealed as communicated vide circular DOR.RRC.REC.302/33-01-010/2025-26 dated November 28, 2025. The directions, instructions, and guidelines repealed prior to the issuance of these Directions shall continue to remain repealed. 83. Notwithstanding such repeal, any action taken or purported to have been taken, or initiated under the repealed Directions, instructions, or guidelines shall continue to be governed by the provisions thereof. All approvals or acknowledgments granted under these repealed lists shall be deemed as governed by these Directions. Further, the repeal of these directions, instructions, or guidelines shall not in any way prejudicially affect: (1) any right, obligation or liability acquired, accrued, or incurred thereunder; (2) any, penalty, forfeiture, or punishment incurred in respect of any contravention committed thereunder; (3) any investigation, legal proceeding, or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid; and any such investigation, legal proceedings or remedy may be instituted, continued, or enforced and any such penalty, forfeiture or punishment may be imposed as if those directions, instructions, or guidelines had not been repealed. B. Application of other laws not barred 84. The provisions of these Directions shall be in addition to, and not in derogation of the provisions of any other laws, rules, regulations, or directions, for the time being in force. C. Interpretations 85. For the purpose of giving effect to the provisions of these Directions or in order to remove any difficulties in the application or interpretation of the provisions of these Directions, the RBI may, if it considers necessary, issue necessary clarifications in respect of any matter covered herein and the interpretation of any provision of these Directions given by the RBI shall be final and binding. (Manoranjan Padhy)
Chief General Manager
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